Practical ways to manage debt and improve your finances

Managing debt can be challenging, especially when rising living costs and household expenses put pressure on your monthly income. However, with careful planning and consistent habits, you can reduce financial stress, pay off debt and work towards a more secure future.

Also see: SARS obtains tax judgment against Mpho Maboi over R468,000 debt

Here are practical ways to take control of your finances.

1. Understand how much you owe

Start by listing all your debts, including personal loans, credit cards, store accounts and vehicle finance. Record each outstanding balance, interest rate, minimum repayment and payment due date.

Knowing exactly what you owe helps you prioritise repayments and identify which debts are costing you the most. The National Credit Regulator (NCR) encourages consumers to understand their credit commitments and borrow responsibly.

2. Create a realistic monthly budget

A budget helps you track your income and expenses. Begin by calculating your take-home salary and listing essential costs such as rent, groceries, transport, electricity and school expenses.

Include debt repayments and other regular commitments. If your expenses exceed your income, identify areas where you can reduce spending, such as unused subscriptions, frequent takeaways or unnecessary purchases.

The South African government’s financial literacy guidance highlights budgeting and responsible spending as important steps towards financial stability.

3. Choose a debt repayment strategy

Two common approaches can help you repay debt more effectively.

The debt avalanche method involves paying minimum instalments on all accounts while directing extra money towards the debt with the highest interest rate. This can reduce the total interest you pay.

The debt snowball method focuses extra payments on your smallest debt first, helping you experience progress sooner.

Choose an approach that suits your financial circumstances, and contact creditors if you cannot afford your repayments.

Also see: Helpful tips to manage your debt better

4. Avoid taking on more debt

Using new loans or credit cards to cover existing debts can worsen your financial situation. Before considering debt consolidation, compare interest rates, fees and the total repayment amount.

Avoid borrowing for non-essential purchases and be cautious of lenders promising quick solutions to financial problems.

5. Start saving for emergencies

Unexpected expenses can disrupt your budget and force you to borrow again. Once essential costs and debt repayments are covered, set aside a small amount regularly.

Start with an affordable target and gradually build an emergency fund that can cover essential expenses when unexpected costs arise.

6. Seek help when necessary

If your repayments have become unaffordable, contact your creditors early to discuss possible arrangements. You can also consider speaking to a registered debt counsellor about debt counselling under South Africa’s National Credit Act.

Visit the National Credit Regulator for guidance and information on registered debt counsellors.

Final thoughts

Improving your finances takes time, patience and consistency. By budgeting carefully, prioritising repayments, avoiding unnecessary borrowing and building savings, you can gradually reduce debt and improve your financial well-being.

Featured image: Pexels/Edge Training

Also see: How to avoid ‘buy-now, pay-later’ debt

Be the first to know – Join our WhatsApp channel for content worth tapping into. Click here to join!